The much-touted value added tax has run into rough weather with at least half a dozen states showing their unwillingness to implement it from April 1, which could force the Centre to defer the deadline by a few months.
Though all states except Delhi, Himachal Pradesh and Arunachal Pradesh, had given consent to get the draft VAT bills passed in their respective assemblies before the April deadline, not many have actually done it so far due to political pressure and agitations by traders.
The Centre has taken pains to explain that small traders do not come under the ambit of VAT as there is a threshold limit ranging from Rs 300,000-500,000 of turnover.
But this has not convinced them, as VAT would bring evaders into the tax net increasing the incidence of tax liability.
Traders' associations have threatened to go on a two-day nationwide strike from March 31 against VAT.
There is a growing concern in the finance ministry that a truncated implementation of VAT would create more confusion instead of facilitating and simplifying the tax system in the states.
"As part of the package, the Centre has promised to reduce Central Sales Tax from 4.0 to 2.0 per cent after VAT is implemented by the states," official sources said, adding if only some states implement VAT, it would not be possible for the government to have differential Sales Tax, because that would be "discriminatory".
While Maharashtra, Gujarat, Karnataka, Tamil Nadu, Andhra Pradesh and West Bengal have indicated that they would stick to the deadline, many others would go ahead only after the grey areas are sorted out by the empowered committee in its meeting on April 8.